Good to Great Summary - Waleed El-Naggar

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<p>Good to Great - Book Summary</p> <p>Waleed El-Naggar May 2011</p> <p>Good to Great Book Summary</p> <p>Good is the Enemy of Great ............................................................................................................ 2 Level 5 Leadership .......................................................................................................................... 2 First Who Then What ................................................................................................................. 3 Confront the Brutal Facts ................................................................................................................ 5 The Hedgehog Concept ................................................................................................................... 7 A Culture of Discipline ................................................................................................................... 9 Technology Acceleration .............................................................................................................. 11 The Flywheel and the Doom Loop................................................................................................ 12 From Good to Great to Built to Last ............................................................................................. 15</p> <p>Waleed El-Naggar</p> <p>1</p> <p>Good to Great Book Summary</p> <p>Good is the Enemy of GreatIn this book, Collins offers a few of the most significant findings gleaned from the study. Of particular note are the many indications that factors such as CEO compensation, technology, mergers and acquisitions, and change management initiatives played relatively minor roles in fostering the Good to Great process. Instead, Collins found that successes in three main areas, which he terms disciplined people, disciplined thoughts, and disciplined action, were likely the most significant factors in determining a companys ability to achieve greatness. The author and his team of researchers established a benchmark for good-to-great as follows: The companies had experienced 15-year cumulative stock returns hat were at or below the stock market index, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years. Each of the companies demonstrated the good-to-great pattern independent of its industry. Each company demonstrated a pattern of results. Each company was compared to a similar company that either did not make the good-togreat leap or made it but did not sustain it. This is used to compare and find out what distinguished good-to-great companies from other companies.</p> <p>-</p> <p>Level 5 LeadershipOne of the most surprising results of the research is the discovery of new level of leadership, although it was never the target of the research.</p> <p>Waleed El-Naggar</p> <p>2</p> <p>Good to Great Book Summary All 11 good-to-great companies were led by level 5 leaders. Leaders of this type combine extreme personal humility with intense professional will. Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. Its not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious, but their ambition is first and foremost for the institution, not themselves1. Despite they run different companies in different markets, they exemplify the same basic set of qualities: Ambitious for the company (setup successor for more success): They setup their companies up for success when they leave. They make sure their successors are poised to continue a successful path, or to exceed the expectations that arise as a result of that success. Maxwell (Fannie Mae) gave up $5.5 million, saving the company from a potentially bad relationship with Washington. Compellingly modest: In contrast with the I-centric style of level 4 leaders, level 5 leaders do not typically talk about themselves. They prefer to direct the attention to other individuals, or to the whole company. They dont aspire to be larger that-than-life heroes. They have unwavering resolve: they have determination to do whatever it needs to be done to make the company great. George Cain (Abbott Labs CEO) destroyed the major cause of the companys mediocrity, nepotism. He rebuilt the board and executive teams with the best people available, not family connections. This chapter describes what level 5 leaders are. The next chapters describe what they do.</p> <p>-</p> <p>-</p> <p>First Who Then WhatI dont know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great2. Executives who led transformation from good to great got the right people on the bus and the wrong people off the bus and then figured out where to drive the bus. The main truths adopted by good-to-great leaders are: - If you start with the who question, rather that the what, you can easily adapt to a changing environment. The right people can adapt to changes and learnt how to be great in a new world. - If the right people are on the bus, motivating and managing people problems are minimal, ideally go away.</p> <p>1 2</p> <p>Jim Collins, Good to Great: Page 21. Jim Collins, Good to Great: Page 45</p> <p>Waleed El-Naggar</p> <p>3</p> <p>Good to Great Book Summary - If you discover the right direction, it will do no good if the bus has the wrong people. Great vision without the right people is irrelevant. People are not the most important assets. The right people are. Whether a person is the right one is related to character traits and innate capabilities rather than specific knowledge, background, or skills.</p> <p>Not a Genius with a Thousand helpersComparison companies frequently followed this model - a genius leader who sets vision and then enlists a crew of highly capable helpers to make the vision happen. When this genius leaves, the company fails.</p> <p>Its who you Pay, Not How You Pay ThemThe research found no systematic difference on the use of stock, high salary, bonus incentives, or long-term compensation between the good-to-great and comparison companies.</p> <p>Rigorous, Not RuthlessThe culture of good-to-great companies tend to be rigorous, not ruthless. Leaders consistently apply exacting standards all time and all levels. The best people need not worry about their positions to concentrate fully on doing what they do best. Three practical disciplines were extracted from the research for being rigorous, rather than ruthless: 1. When in doubt, dont hire keep looking. No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a</p> <p>Waleed El-Naggar</p> <p>4</p> <p>Good to Great Book Summary great company. If the growth rate in revenues consistently outpaces the growth rate in people, you cannot build a great company. 2. When you know you need to make a people change, act. The moment you feel the need to closely manage someone, youve made a hiring mistake. The right people do not need to be managed. They may need to be guided, taught, led, but not tightly managed. Letting the wrong people hang around is unfair to all the right people, who often find they are compensating for the wrong peoples inadequacies. This does not mean trying a lot of people and keep the good ones. Rather they adopt the approach Lets take the time to make rigorous A+ selections right up front. If we get it right, well do everything we can to try to keep them on board for a long time. If we make a mistake, then well confront that fact so that we can get on with out work and they can get on with their lives3. 3. Put the best people on the biggest opportunities, not the biggest problems. Many people think that putting the best people in bad situations will help turn bad situations around. Good management of problems can make the company good, but building opportunities in the only way to become great. Selling off your problems does not mean selling off the best people. The best people must always have a seat on the bus, which will make them more likely to support changes in directions. Good-to-great executive teams have people who debate vigorously in search for the best answers, but at the end they unify behind decisions regardless of parochial interests.</p> <p>Confront the Brutal FactsOn the road to greatness starts by confronting the brutal facts of current reality. With an honest diligent effort to determine the truth of current situation, the right decisions often become selfevident. A&amp;P had a perfect business model fir the first half of the 20th century: cheap, plentiful groceries sold in utilitarian stores. In the second half of the century, Americans began to demand bigger stores, more options, fresh baked goods, fresh flowers, banking services and other services. They wanted superstores. Rather than ignoring the brutal truth, as A&amp;P did, Kroger grocery chain acted on it, eliminating, changing, or replacing every single store that did not fit the new reality. Good-to-great companies displayed 2 distinctive forms of disciplined thought. The first is that they infused the entire process with the brutal facts of reality. The second (next chapter) is that they developed a simple, deeply insightful, frame of reference for all decisions. Both good-to-great and comparison companies had a vision for greatness. Unlike comparison companies, good-to-great companies continually refined the path to greatness with the brutal facts of reality.3</p> <p>Jim Collins, Good to Great: Page 57</p> <p>Waleed El-Naggar</p> <p>5</p> <p>Good to Great Book Summary Good-to-great companies management meetings usually focus on talking about the scary things that may have negative impacts on the companys results. Leadership is only about vision, but also is equally about creating a climate where the truth is heard and the brutal facts confronted. Talking a company from good to great requires a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be likewise heard. To create this environment, the following basic practices must be used: 1. Lead with questions, not answers. Leaders do not come up with answers. It means having the humility to grasp the fact that the leader does not understand enough to have the answers, and then to ask questions that will lead to the possible insights. 2. Engage in dialogue and debate, not coercion. Dialogues are used to engage people in the search for the best answers. Good-to-great companies had a great tendency for intense debates, discussions and healthy conflicts. 3. Conduct autopsies, without blame. Its one of the major pillars of building a climate where truth is heard. Having the right people on the bus, there is will almost be no need to assign blame, but rather need to search for understanding and learning. 4. Build red flag mechanism. Good-to-great companies had no better access to information than comparison companies; they simply gave their people the customer ample opportunities to provide unfiltered information and insight that can act as an early warning for potentially deeper problem.</p> <p>The Stockdale Paradox"This is a very important lesson. You must never confuse faith that you will prevail in the endwhich you can never afford to lose-with the discipline to confront the most brutal facts of your current reality, whatever they might be.4" Research by the Intl Committee for the Study of Victimization found that those facing serious adversity generally fall into one of three categories: 1. Those who were permanently dispirited by the event 2. Those who got their life back to normal 3. Those who used the experience as a defining event that made them stronger. In every case, the management team responded with a powerful psychological duality. On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts4</p> <p>Jim Collins, Good to Great: Page 85</p> <p>Waleed El-Naggar</p> <p>6</p> <p>Good to Great Book Summary</p> <p>The Hedgehog ConceptIn 1953, the Isaiah Berlin published his very famous essay The Hedgehog and the Fox. According to the essay, the world is divided into two groups, based on an ancient Greek proverb. Foxes pursue many ends at the same time and see the world in all its complexities; the scattered, diffused and moving on many levels, never integrating their thinking into one overall concept or unifying vision. On the other hand, hedgehogs simplify a complicated world into a single idea or principle that unifies and guides everything. Regardless of the world complexities, the hedgehog reduces all challenges and dilemmas to simple ideas. Anything that does not relate to the hedgehog idea holds no relevance. The hedgehog always wins against the fox in real life. Those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature to drive toward what we came to call a Hedgehog Concept for their companies. Those who led the comparison companies tended to be foxes, never gaining the clarifying advantage of a Hedgehog Concept, being instead scattered, diffused, or inconsistent.5</p> <p>The Three CirclesThe major strategic difference between the good-to-great companies and comparison companies lay in two fundamental distinctions: the good-to-great companies based their strategies on deep understanding along three dimensions and they translated this understanding into a simple and clear concept that guided all their efforts. The good-to-great looked at the intersection of the next three circles: 1. What you can be the best in the world at (and what you cannot be the best in the world at). Its not setting a goal to be the best, a strategy to be the best, an intention to be the best or a plan to the best. It is an understanding what you can be the best at. The good-togreat companies realize the distinction. Just because something is your core business does not necessarily mean you can be number one at this business.</p> <p>5</p> <p>Jim Collins, Good to Great: Page 92</p> <p>Waleed El-Naggar</p> <p>7</p> <p>Good to Great Book Summary 2. What drives your economic engine. To get insight into the drivers of the economic engine, look for one denominator (profit per x, e.g., profit per customer visit) that has the greatest impact. The denominator can be subtle and unobvious. The key is using the denominator to gain deep understanding and insight into economic model. Good-to-great companies do not have to be in a great industry. They attained profound insight into their economies regardless of their weak industries. 3. What you are deeply passionate about. Good-to-great companies focused on activities that ignited their passion. You have to discover what makes you passionate.</p> <p>Growth is not a Hedgehog Concept. If you the right Hedgehog Concept, y...</p>